By this theory, Chen pointed out that the Republic of China was then at the 4th stage. That is, Taiwan is an already independent state separated from mainland China, and is called the "Republic of China". This theory is welcomed by the mainstream of the Pan-Green coalition (led by the Democratic Progressive Party) in Taiwan, which supports eventual de jureTaiwan independence; but is not welcomed by most members of the Pan-Blue coalition (Kuomintang), which supports eventual reunifying Taiwan with mainland China as part of a single Chinese nation. Some members of the more strongly pro-independence Taiwan Solidarity Union also opposes this view since they deem the ROC to be an illegitimate foreign regime that should be replaced by the proposed 'Republic of Taiwan'. The Pan-Blue Coalition agrees with the first three stages, but disagrees with the fourth stage, and prefers to maintain the distinction between the "Republic of China" (the polity) and "Taiwan" (part of the territory the polity governs). The government of the People's Republic of China has also voiced opposition against fourth stage on the grounds that such an interpretation is a step closer to de jure Taiwan independence. (Officially, the PRC only recognizes the existence of the ROC until 1949.)

During the Kuomintang (KMT) administration under Lee Teng-hui, the government frequently referred to the polity as the "Republic of China on Taiwan." This term was first publicly[dubious– discuss] and officially used in his speech at Cornell University, Ithaca, New York, United States in 1995. It was used to identify the Republic of China with its remaining major component – the island of Taiwan, as opposed to its decades-long claim to all China since losing the civil war in 1949. Prior to this speech, government officials used "Republic of China" when the name of the state was used. Lee's usage is considered as a departure from the convention, as this usage can be interpreted in the sense that the Republic of China's sovereignty does not extend to mainland China.

During the Democratic Progressive Party (DPP) administration under Chen Shui-bian, he directed that all government publications and websites to use the form "Republic of China (Taiwan)." These two variations have been used under their respective administrations for the ROC petition to join the United Nations. Unlike the Cold War era when the ROC competed with the PRC as the legitimate representative of China (including Taiwan), during Chen Shui-bian's presidency, the ROC did not seek to be the representative of China (i.e. it does not seek the PRC's seat on the Security Council or its ouster) and stresses in its petitions that it was only seeking to represent the people of the land under its effective control.

In 1 April 2008, when the then President-elect Ma Ying-jeou met with President Chen Shui-bian for government handover matters, Chen expanded his four-stage theory and expressed the view that under Ma Ying-jeou's presidency the Republic of China will progress into the stage of:

Ma Ying-jeou earlier during this meeting expressed the view that the Republic of China is an independent sovereign state, and currently its main territories are island groups of Taiwan, Penghu, Kinmen, Matsu. Taiwan's official name is the Republic of China, and "Taiwan" is the name that common people use to refer to the Republic of China. During Ma Ying-jeou's presidency, all government publications and websites retain the form of "Republic of China (Taiwan)" in English, which it inherited from Chen Shui-bian's presidency, but the "(Taiwan)" remark to the Republic of China has been removed in the Chinese version. English speakers commonly refer to the Republic of China as "Taiwan" because the name "Republic of China" is not well known to English speakers, but as the name is known to the Chinese speaking population, the current administration believes "Taiwan" remark in Chinese version is no longer necessary.